The latest National Retail Federation (NRF) US ocean import report has stirred both optimism and uncertainty within the maritime industry. The report predicts that the relative volume strength, estimated at around two million TEU for August, will persist through October. This projection is indicative of importers’ hopes for robust consumer demand during the upcoming holiday season.
Strong Projections Amidst Uncertainty
According to the NRF report, September and October are expected to see volumes 6-7% higher than in 2019, followed by a moderate dip in November and December. Despite this dip, volumes are anticipated to remain about 15% higher than the pre-pandemic levels. This late Q4 strength could potentially signal a general restocking cycle, as the goods arriving during this period might be too late for the holiday rush.
Transpacific Rates and Capacity Challenges
Transpacific shipping rates to the West Coast have experienced a slight decrease of approximately 7% this month, while rates to the East Coast have remained relatively stable. This stability in September rates, albeit with elevated volumes, may align with the NRF’s volume projections and suggest the possibility of a moderate but sustained peak through October. However, this stability is partially due to significant capacity restrictions imposed by carriers.
Pessimistic Signs Emerge
Despite the positive projections, there are signs of pessimism looming on the horizon. Reports of decreasing ocean bookings, coupled with easing rates just before Golden Week – a time typically associated with upward price pressure – point in the opposite direction.
In a recent market update webinar, Robert Khachatryan, CEO of freight forwarder Freight Right Logistics, noted that many of their customers are witnessing “drops in orders and expectations of a drop in consumer spending in Q4.” Falling rates ahead of Golden Week only serve to reinforce the skepticism that this year’s peak shipping season will extend beyond September.
Challenges for Carriers
If demand continues to wane while capacity expands, carriers are poised to confront additional challenges in maintaining elevated rates. The market’s overcapacity has compelled some carriers to idle new ultra-large vessels even before their maiden voyages from Asia to Europe. Rates on this route saw an 8% decline last week to $1,608/FEU, although they still hover slightly above 2019 levels. Carriers have responded by announcing additional blanked sailings, even in the weeks following the Golden Week holiday, indicating an anticipated decrease in demand during a period traditionally considered Asia to North Europe’s peak season.
Troubling Trends Across Trade Routes
Across various trade routes, troubling trends are emerging. While ocean volumes have remained strong for Asia to Mediterranean trade, rates plunged by 14% last week, reaching about $1,800/FEU. This marks the lowest level for this route since 2019 and falls just below the September 2019 mark. The decline can be attributed to carriers adding excess capacity in recent months due to resilient demand, prompting them to now reduce capacity in an attempt to match volumes.
Transatlantic trade has faced similar challenges, with rates plummeting 7% last week to less than $1,100/FEU – a staggering 45% lower than in 2019. Carriers have responded by announcing a significant increase in blanked sailings in a bid to restore rates.
Impact on Air Cargo
The uncertainty surrounding the ocean peak season has cast a shadow over the strength of air cargo’s upcoming peak season. However, Robert Khachatryan, CEO of Freight Right Global Logistics, reports a recent uptick in demand for transpacific air bookings in the last few weeks. This, coupled with the slow rebound of tourism in China, which hasn’t added as much passenger capacity compared to other regions, may explain the 37% increase in China to North America Freightos Air Index rates since early August, reaching $4.78/kg.
As we navigate these uncertain waters, the maritime and logistics industry must remain agile and adaptable to respond to evolving market dynamics. The coming months will be critical in determining whether the industry can weather these challenges and continue on its path to recovery.
